Anthony Rozmus - Investor Relations Steve Lockard - President and CEO Bill Siwek - Chief Financial Officer.

Stephen Byrd - Morgan Stanley Phil Shen - ROTH Capital Partners Jeff Osborne - Cowen and Company Pavel Molchanov - Raymond James Alex Fuhrman - Craig-Hallum Joseph Osha - JMP Securities.

Good afternoon. And welcome to TPI Composites’ First Quarter 2018 Earnings Conference Call. Today’s call is being recorded and we have allocated hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Anthony Rozmus, Investor Relations for TPI Composites. Thank you. You may begin..

Thank you, Operator. I’d like to welcome everyone to TPI Composites’ first quarter 2018 earnings call. In addition to our press release, you can also find our Q1 earnings slide presentation on our IR website.

Before we begin, let me remind everyone that during this call TPI Composites’ management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about future expectations, projections, beliefs, estimates, plans and prospects.

Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are described in our Form 10-K and other periodic reports as filed with the Securities and Exchange Commission.

The company does not undertake any duty to update such forward-looking statements. Additionally, during today’s call, the company will discuss certain non-GAAP measures, which we believe can be useful in evaluating our performance.

The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. The reconciliations of GAAP to non-GAAP information can all be found in our earnings release, which is posted on our website at www.tpicomposites.com, and it is also included in our Form 10-K as filed.

With that, let me turn the call over to Steve Lockard, TPI Composites’ President and CEO..

Good afternoon, everyone. And thank you for joining our first quarter 2018 earnings call. I am joined today by Bill Siwek, our CFO. I will start with some highlights from the quarter, followed by a brief update of the wind market and TPI’s progress on our strategy of strong and diversified global growth.

I will then turn the call over to Bill to review our financial results in more detail. I will then conclude with a review of our full year 2018 outlook before we open up the call for Q&A. Please turn to slide five. We delivered another solid quarter of operational and financial performance.

Our sales grew 21.7% to $254 million, adjusted EBITDA for the quarter increased 55.6% to $27.4 million and our adjusted EBITDA margin increased 240 basis points to 10.8% from 8.4% in the first quarter of 2017, reductions in manufacturing cycle times, improvements in productivity and share gain for material cost out efforts continue to drive our adjusted EBITDA results.

We signed a multiyear supply agreement with Vestas for four manufacturing lines with an option for additional lines in a new manufacturing hub in Yangzhou, China. We added a third manufacturing lines to our existing supply agreement with Vestas in Turkey.

Since the beginning of 2018 we signed supply agreements for a total of five lines representing potential contract revenue of up to $1.2 billion over the term of the agreements and we are tracking well against our planned range for the year of closing on 10 to 14 lines. We’ve entered into an agreement with Navistar, Inc.

to design and develop a Class 8 truck comprised of a composite tractor and frame rails, while targeting 30% weight savings compared to current trucks. This brings our development program count in strategic markets to a total of five.

Shortly after quarter end we refinanced our senior debt facility with a new $150 million revolving facility giving us an additional $50 million of capacity and reducing our stated interest rate by 375 basis points. Additionally, we executed an interest rate swap to fix our rate at 4.19% on $75 million.

The total amount outstanding when we close the transaction. The JEC Group announced the TPI composites and Proterra have won a Future of Composites and Transportation 2018 Innovation Award in Public Transportation Category with the following title Design and Fabrication of Integrated Monocot Composite 40 Foot Plug-in Electric Transit Bus.

This underscores the deep collaborative relationships and cooperative innovation with our customers.

Sandia National Laboratories teeming with TPI and Oak Ridge National Laboratory, a leader in the field of large-scale 3D printing has won the Federal Laboratory Consortium for Technology Transfers FLC National 2018 Technology Focus Award for demonstrating a 3D printed mold for a wind blade directly from a digital design.

While the demonstration focused on a relatively small 13 meter blade, if applied at larger scales in industry designers could take more risks with experimental designs and accelerate prototyping and innovation in wind technologies.

We continue to develop our robust wind pipeline of global opportunities with current and new customers, both onshore and offshore blades, as blade continue to get longer, utilize more advanced materials and we continue to drive increased output per line, the revenue from new lines will grow meaningfully.

Furthermore, as our customers transition to larger wind blades under existing contracts, the revenue per line will increase, providing additional revenue growth opportunities from existing facilities. At the end of last quarter, our prioritized pipeline was 24 lines.

As of today our prioritized pipeline of lines we expect to close by the end of 2019 sits at 19 due to the five lines that we close since your end.

We remain very confident in our ability to convert this pipeline by the end of 2019, and in fact, we’re in active negotiations for a number of lines with the expectation of closing them in the next one month to two months.

As we talked about previously, 2018 will be an investment year for TPI as we have estimated that 14 lines will be in transition and 12 lines will be in startup. Notwithstanding, this we estimate that we will have topline growth of approximately 10% this year.

We expect these new lines, as well as the transitions and additional startups will position us nicely for strong growth in 2019 and we’re still confident in our revenue target of $1.3 billion to $1.5 billion or approximately 35% growth in 2019. Therefore, our three-year revenue CAGR target still stands at 20% to 25% through 2019.

Our strategy remains intact and we continue to see traction as we diversify our sources of revenue across customers, geographies and non-wind markets. We will continue to execute on this strategy and take advantage of the growth in the global wind market, stability in the U.S. wind market and the ongoing wind blade outsourcing trend.

We believe that the combination of our current lines under contract combined with our prioritized pipeline provide a clear path to more than $2 billion in wind -related annual revenue over the next few years plus opportunities in other strategic markets.

Turning to slide six, as of today, our long-term supply agreements provide potential revenue of up to $5.4 billion through 2023, including the 46 wind blade manufacturing lines and our transportation production lines.

Our potential revenue under our supply agreements has increased by over $800 million over last quarter with the addition of the new Vestas’ lines, notwithstanding, our Q1 billings of $223.7 million. At this time last year, our potential revenue under our supply agreements was approximately $4.2 billion.

We have increased that amount by approximately $1.2 billion net of the impact of approximately $950 million of billings since that time. The minimum guaranteed volume under our supply agreements has grown to approximately $3.6 billion, up from $2.7 billion at this time last year. Please turn to slide eight.

Our view of the onshore global market growth remains essentially unchanged. Annual installed onshore wind growth is expected to increase to 63.3 gigawatts in 2027 according to MAKE.

This projected growth will be driven primarily by developing markets, which according to data provided by MAKE will grow at CAGR of 13.3% during that period, while more mature markets those with at least 6 gigawatts in installed capacity at the end of 2016 will continue to grow but at a more modest CAGR of 1.6%.

We believe we remain well-positioned to serve these emerging markets from our facilities in China, Juarez and Matamoros, Mexico and Turkey, and we expect the growth of these markets will continue to drive the outsourcing trend we’ve seen over the last 10 years.

We also see a strong outlook for wind energy in large mature markets such as China, the U.S. and India, areas where there continues to be very low wind penetration rates. The opportunity for when in both emerging and large developed economies allows multiple avenues for growth for TPI and the broader industry. With respect to the U.S.

market, we are pleased with the outcome of Tax Reform late last year, where threats to alter the PTC phase down were rejected by key republican allies. As you can see on slide nine, the next few years are expected to be strong with expected annual installations averaging 10.7 gigawatts. We believe we’ve remain very well-positioned in the U.S.

with our current customers accounting for 99% of the U.S. market share in 2017 and they also account for 98% of the projects under construction or in advanced development where developers have reported an OEM. Although we recognize that there still some uncertainty in the marketplace concerning the U.S.

wind market beyond 2020, optimism is building due to several factors. 80% PTC orders placed in 2017 will increase installed gigawatts in 2021, MAKE reported that there was 10 gigawatts of wind safe harbored in 2017, 77% more than in its previous forecasts. In the same manner 60% PTC orders placed this year should provide for more volume in 2022.

The pure economics of wind energy are very compelling, corporate and retail customers want to buy wind, utilities are using it to grow their businesses and to meet aggressive CO2 emission reduction goals and many large institutional investors are requiring change in environmental and in social responsibility from the energy industry.

The fundamental drivers of our industry are getting really good, based on economics and customer choices. Before I turn the call over to Bill, I’ll touch on a few topics to that have been getting some air time over the last couple of months, primarily trade, OEM margin pressure and the liquid epoxy resin market.

We are continuing to monitor trade talks closely particularly with respect to the recent tariffs proposed on steel, Chinese products, as well as the continued negotiations around NAFTA modernization.

With respect to NAFTA, we haven’t seen any proposed changes that would impact our operations in Mexico or our ability to continue to cost-effectively serve our customers in multiple markets out of our Mexico locations. The office of the U.S.

trade representative has determined that the acts, policies and practices of the Government of China related to technology transfer, intellectual property and innovation are unreasonable or discriminatory and burden or restrict U.S.

commerce and we will hold a public hearing regarding a proposed determination on appropriate action in response to these acts, policies and practices. The trade representative has also proposed an additional duty of 25% on a list of products from China.

The list of products set forth in the annex to the notice did not include any of the raw materials or equipment that we use in our operations that we currently or may in the future import from China nor did it include wind blades. We will continue to monitor this closely.

With respect to the tariffs placed on steel in late 2017, the only steel in our blades are the bolts that secure the blade to the hub of the turbine, so it’s a very small portion of the overall cost of the blade and will not have any impact on our costs. As for the balance of the U.S.

wind industry, MAKE has estimated that under a worst case scenario wind LCOEs could be impacted by between 2% and 3%.

Many of our customers have been publicly discussing some of the margin pressures that they’re experiencing as a result of the transition to more auction based tenders in many regions of the world, the competition from solar in certain regions and continued low natural gas prices.

As we’ve outlined in our public documents and discuss with many of you, we have always taken an open book approach with our customers in order to collaboratively drive down the cost of the bills of material and reduce our manufacturing costs.

Our supply agreements provide a shared game mechanism, whereby as we work to drive costs out of the blades and manufacturing process, we share a portion of that with our customers. This has the effect of reducing the sales price of the blade while enabling us to maintain or expand margins.

We will continue to collaborate with our customers in this manner and we will continue to use our contract structure to help drive down the LCOE of wind energy, while building value for TPI.

Finally, many of you have been asking about the impact of the recent spike in spot prices for some of the feedstocks used in liquid epoxy resins or LER and how this may impact TPI’s results.

The spike in spot prices was primarily driven by a reduction in supply after the Chinese Ministry of Environment Protection implemented new pollution measures late last year and many plants manufacturing the key components of LER were shutdown until environmental improvement could be put in place.

This supply shortage has enabled many non-Chinese suppliers, the opportunity to raise prices in the short-term. We identified this issue early and have implemented a comprehensive mitigation strategy that we are executing in order to minimize the impact of this short-term price increase.

I will now turn the call over to Bill to go through our financial results and to walk you through our LER strategy and explain why this will not impact our ability to still hit the financial guidance we set forth back in November 2017, which we reaffirmed in March of 2018 and will reaffirmed today.

Bill?.

Thanks, Steve. In addition to our epoxy strategy and before I hit the financials in detail, I will also touch on our ASC 606 restatement and implementation at a high level to put the more detailed discussion in the context. First, let’s discuss epoxy pricing.

We disclosed in our December 31, 2017 10-K that the impact of a 10% increase or decrease in epoxy resin pricing would have had an impact of approximately $13 million on our 2017 income from operations.

That was a very conservative number as it was based on the total amount of resident we purchased during the year and didn’t take into account shared pain gain structure of our contracts.

Also it’s important to note that approximately 35% of the epoxy resin we use is purchased under contracts controlled by our customers and therefore 100% of all price changes are borne by those customers.

And for the customers where we control the epoxy resin contracts, we have the ability to generally pass on up to 70% of the net increase in our bonds which would include epoxy resins.

You’ll see in our Form 10-Q filed earlier today we have updated our commodity risk disclosure to take into consideration only the impact the resin cost under our control.

With that as a backdrop, our global supply chain strategy is to have multiple suppliers for all key raw materials to ensure not only an adequate and uninterrupted supply, but to also maintain a competitive pricing environment.

Furthermore, for key inputs like epoxy resin, having suppliers that are backwards integrated, in other words, they manufacture their own feedstocks is also critical. We have multiple suppliers of epoxy resin and also suppliers that manufacture their own feedstocks, so this is an advantage for us.

Additionally, for the same reason, we all like the visibility we have with our long-term supply agreement with our customers, our suppliers also like the visibility we provide them as a result.

This enables us to develop long-term mutually beneficial relationships and helps to deter them from trying to take advantage of short-term pricing swings in order to protect a long-term growth opportunity with us.

Bottomline, our mitigation strategy, which includes in some circumstances changing suppliers and our other situations changing other key components such as hardeners and pace is enabling us to mitigate most, if not all of the epoxy pricing exposure that was identified early in 2018.

Finally, we are continuously working on driving the cost out of the build and materials, our manufacturing process and overhead, so an increase in one commodity although important and significant doesn’t have to result in an increase in our overall cost or negatively impact our margins, therefore we have not revised nor do we anticipate revising our guidance for 2018.

Now for a quick recap on the impact of the adoption of ASC 606. As we’ve discussed the last few quarters, the adoption of ASC 606 has had the effect of accelerating revenue as we now required to recognized revenue on a percentage of completion basis and also recognized revenue on raw materials when purchased if they are customer specific.

During the first quarter of 2018, we accelerated the production of certain blade models for some of our customers in order to meet their aggressive delivery schedules and to complete certain volumes in order to facilitate some of the blade transitions we expect to have during 2018.

As a result, the number of blades in production at quarter end was unusually high in two of our geographies. As I will discuss in more detail this has resulted in significantly higher revenue compared to billings in the first quarter and has also favorably impacted net income, earnings per diluted share and adjusted EBITDA.

Notwithstanding, we are affirming our full year guidance for revenue, billings, earnings per share and adjusted EBITDA and we plan to provide more specific quarterly guidance for these items later in the quarter once we have finalized the full update of our models under ASC 606.

All comparisons in the MD&A section of our Form 10-Q and in the discussion of follow will compare Q1 2018 under ASC 606 to Q1 2017 as restated for ASC 606. Please refer to slides 12 and 13, for the first quarter of 2018, net sales for the quarter increased to 21.7% to $254 million compared to the same period in 2017.

Net sales of wind blades increased by 19.7% to $234.2 million for the first quarter of 2018, as compared to the first quarter of 2017.

The increase was driven by an overall increase in the average sales prices of blades during the quarter, notwithstanding a 10.5% decrease in the number of wind blades delivered during the first quarter compared to the same in 2017 as a result of transitions and the loss of volume related to our contracts with GE in China and Turkey.

Total billings for the first quarter increased by $12.3 million or 5.8% to $223.7 million compared to the same period in 2017. The favorable impact of currency movements on net consolidated sales was 3.4% for the quarter compared to a negative impact of 1.4% in the first quarter of 2017.

Gross profit for the quarter totaled $28.3 million, an increase of $8.3 million over the same period of 2017 and our gross profit margin increased by 160 basis points to 11.1%.

The increase in gross margin was driven primarily by continued operating efficiencies, the impact of net savings and raw material costs, offset by the negative impact of currency movements and an increase in startup and transition costs of $8.6 million compared to the same period a year ago.

General and administrative expenses for the quarter were $11.2 million or 4.4% of net sales as compared $8.3 million in 2017 or 4.0% of net sales.

The dollar increase quarter-over-quarter was largely driven by cost related to the implementation of ASC 606, cost related to Sarbanes-Oxley and increase personnel costs from filling key global positions to support our growth and diversification strategy.

Net income for the quarter was $8.6 million, as compared to $5.2 million in the same period of 2017.

This increase was primarily due to the improved operating results discussed above; diluted earnings per share was $0.24 for the quarter, compared to $0.15 for the same period in 2017; adjusted EBITDA increased to $27.4 million, compared to $17.6 million in the same period of 2017; our adjusted EBITDA margin for the quarter was 10.8%, a 240 basis point improvement from our margin of 8.4% in the first quarter of 2018 -- 2017, excuse me.

Moving on this slide 14, we ended the quarter with $138.8 million of cash and cash equivalents and total debt of $125.7 million or total net cash of $11.1 million, compared to net cash of $24.6 million at December 31, 2017.

For the quarter we had net cash used in operating activities of $3 million, while spending $11.7 million on CapEx, resulting in negative free cash flow for the quarter of $14.7 million.

Net cash used in operating activities was primarily driven by the increase in contract assets, in other words, inventory under ASC 606 as we have accelerated production in certain sites to accommodate customer delivery schedules and transitions later in the year.

In April we completed the restructuring of our existing senior credit facility with $150 million revolving line of credit with the syndicate of banks led by J.P. Morgan Chase, Wells Fargo and Capital One.

Shortly thereafter, we entered into an interest rate swap to fix our rate on $75 million of the outstanding borrowings for a five-year period at 4.19%.

This represents a rate reduction of 375 basis points from our prior facility and provides us with interest rate certainty and what we expect to be an environment of an increasing rates over the next several years.

We expect the net impact of these transactions to reduce our cash interest expense for 2018 by $1.7 million and will result in overall cash savings of $4.5 million in 2018 since we will avoid $2.8 million of principal payments that were due in 2018 under our prior facility.

Furthermore, the additional capacity under the new revolver gives us added flexibility as it relates to some of our outstanding foreign debt, as well as additional optionality related to funding our continued growth.

We continue to be pleased with the strength of our balance sheet, our ability to generate the cash we need to expand our global footprint and the additional flexibility and certainty our new credit facility and swap provide. With that, I will turn it back to Steve..

Thanks, Bill. Please turn to slide 16. Now I would like to update our key guidance metrics. We expect total billings for 2018 of between $1 billion and $1.05 billion, while revenue under ASC 606 is expected to be within the same range. We expect our adjusted EBITDA for the full year to be between $75 million and $80 million.

We expect to deliver between 2,500 and 2,525 wind blades set in 2018. Blade average selling price for the year will be in the range of $125,000 to $130,000. Total dedicated lines at year end will be between 51 and 55. Capital expenditures will be between $85 million and $90 million.

Startup and transition costs will be between $58 million and $61 million. Net interest expense will be between $11.5 million and $12.5 million.

We remain very confident in our global competitive position and the application of our dedicated supplier model to take advantage of the strength and the growing regions of the wind market the trend toward blade outsourcing and the opportunities for market share gains provided by the current competitive dynamic.

We are very pleased with TPI’s first quarter results. To summarize, we delivered outstanding results both on the topline and on an adjusted EBITDA basis. We signed multiyear supply agreements for five lines plus options with Vestas adding nearly $1.2 billion to our total potential revenue under our supply agreements.

We expanded the potential diversification of our revenue base with the Navistar joint development agreement. We remain very confident in our ability to continue converting are prioritized pipeline by the end of 2019 and expect to be announcing some of those conversions before the end of the quarter.

I want to thank the TPI associates for their dedicated effort, our customers for placing their trust in us and our shareholders for your continued support. Thank you again for your time today. And with that, Operator, please open the line for questions..

Thank you. [Operator Instructions] Our first question is from Stephen Byrd from Morgan Stanley. Please go ahead..

Hey, guys. Congratulations..

Thank you, Stephen..

Thanks, Stephen..

Just wanted to anticipate on a couple things, because I think about the longer term, 2019 is obviously going to be a very big year of growth and I’m thinking about the sort of the pace transitions with your customers, the rate of change, obviously, we have seen, I guess, I think, but it is almost an arms race in terms of the increase in wind blade length and characteristics, and that’s also the better for you, but also at the same time in thinking about sort of the pace of transition to ever larger sort of upgraded blade technology.

I know you’re not giving guidance on ‘20, but just at a high level when you think about transition and the pace transitions post 2019, is there any sort of thought you give us in terms of that sort of rate of change of transitioning of production line?.

Yeah. Stephen, I think, it’s a good question. There has been a lot of rapid change and product transitions at this period of time and kind of chasing each other leapfrogging to some degree on rotor size and you remember the big driver for LCOE reduction is taller towers and longer blades. So just by going bigger in the blades, LCOE comes down.

Some of the tenders that have been bided bid into and the competitive pricing have been on the basis of the next-generation larger rotor size and that’s what guys are looking out the cost curve a couple years bidding on a more aggressive pricing on that basis. We would expect as things normalize a bit, as the PTC glide path is achieved in the U.S.

and then as other markets are really selling wind turbines on a fundamentally economic basis, where that becomes a bit more the norm than the question is are we cheaper as an industry in technology than marginal cost of coal, for example, or burning gas in existing gas plants and it’s wanting to be cheaper than the new installed hardware and that gas, for example, it’s another if we are cheaper than the fuel.

And so our sense is, once we, the industry achieves those numbers then I think the turbine companies will be focusing a bit more on their return on their invested capital and probably slow things down a bit.

I mean that that’s our sense of it as a general direction, I would say, it’s not something we are in control of course but just to give you a sense of the macro dynamics..

Yeah. That’s very helpful. On offshore wind, at least, I have been just thinking about the nature of that business, and for example, in North America there’s a lot of activity in the Northeast United States, and sort of, I guess, I think, about a lot of local infrastructure that likely to be built I believe in New England.

Just are there differences in terms of the offshore wind business in terms of whether it would be manufacturing location or other characteristics of production that just are notable that we should be thinking about, I guess, I am always thinking about the very large factories that you all have globally that are highly efficient relative to, perhaps, I guess, I think, perhaps, somewhat smaller local sort of offshore capabilities, not only because of the infrastructure is local also the volume seemed to be a bit smaller in certain locations.

But are there certain differences in the offshore market as you think about tackling that that we should be keep in mind?.

Yeah.

The main difference with the offshore blades, as you know is, is really the physical size Stephen, right, the blades today are in the call it 85 meter to 90 meter range per blade for offshore and growing, and so it’s even more important with a single piece blade at that size that the blade never touch a truck or only be trucked or moved by rail a very short distance and then really moved by water by barge or by ship.

I think your point is right that, it doesn’t really make sense to us, for example, to think about opening small plants in high labor costs regions, with immediate water access to serve the New England offshore market, for example.

But instead what probably does make more sense is to leverage the big efficient factories that you talked about with one offshore line, for example, along with a bunch of onshore blade line. So that we leverage the material costs. We leverage the workforce. They are very efficient big scale operations.

But we can still efficiently move that big blade by water to where the offshore sites are going to be. That also helps us then to not only efficiently price into the lumpy the smaller project, but they’re a bit lumpier in nature as well.

So rather than building a plant that is dedicated to a market that maybe up for year and then down for year, it really spreads our bets much more in a much smoother manner. So we think that’s a better way to go. You can imagine our Matamoros site serving that type of opportunity.

You can imagine the Yangzhou, China facility, which has immediate water access to the Yangtze river, being able to do that very efficiently as well. And I think you may remember we have said in our now 19 more pipeline. There are a couple of offshore blades in that as well. That’s the way we would plan to attack it..

That makes perfect sense. Lately, if I could very quickly, just on the vehicular market you continue to make very nice progress and you recognized for technical achievements there.

At a high level though in terms of just thinking about when this is going to become a very meaningful part of the business, I just wanted to do a quick attempt check is there anything fundamentally different or is it sort of more lock stepping progress but not sort of step change differences in terms of how you are tackling that?.

Yeah. For us it’s the same strategy that we’ve discussed before and as we think about it, the addition of 19 lines in wind, if we end up we would call it 65 production lines in wind, even if you haircut that back to just say 60 for sake of discussion times 35 million per year per line.

That’s $2 billion of revenue for our company in wind alone and we are not guiding on a particular date for that. But as we said in our prepared remarks we are seeing a pretty clear picture if you will to roughly $2 billion annually in wind-only related revenues.

So I think in the transportation or non-wind strategic markets work, Stephen, for us just thinking about call it year’s four through 10, more in that timeframe, that we want to make sure we continue to have good revenue growth opportunities for our company in that timeframe and we are seeing this market area the adjacency are applying our composites technology to kind of the one lane over market opportunity as a smart way to do that.

So these development programs are very important to us strategically. They’re not necessarily going to add significant revenue in the immediate term, but we are building a business for a few years out..

Thanks so much. Really appreciate it..

Thank, Stephen..

Thanks, Stephen..

Our next question is from Phil Shen from ROTH Capital Partners. Please go ahead..

Hey, guys. Congrats on the nice results for Q1.

We heard you reiterate a guidance for ‘18, want to make sure that you’re doing the same for 2019 as well? And let’s say to -- Bill and Steve thanks for the detail in the resin situation, let’s say, the condition persists and the resin levels remain elevated? Is there potential impact on your 2019 outlook or do you expect to have enough tools and avenues to able to continuing mitigate it beyond ‘18?.

Yeah. Phil, we didn’t specifically, I think, Steve, did mention ‘19, we haven’t moved off the target. We haven’t provided formal guidance yet, but we haven’t moved up the target that we talked about at the end of the year or in November, so we are still there.

From the epoxy standpoint, we are already seeing prices start to stabilize and in some cases go down. If you look at LER in Europe, Asia and in China, outside of -- you look at all of Asia including China LER prices came down in April from March and the U.S. is still a little bit elevated. But we don’t anticipate that to continue.

And as we talked about before we are epoxy resins are a 20% give or take depending on the blade type of our overall raw material bomb, so that give us 80% of other stuff to continue to drive cost out and to drive operational efficiency.

So long answer to a short question but the answers at this point we don’t see it impacting what we’re talking about thus far for 2019..

And Phil, it’s Steve, just to be clear we are reaffirming our confidence in our revenue target of a range of $1.3 billion to $1.5 billion in 2019 and I think your question Bill’s answer relates then to we would expect the EBITDA target on that revenue to remain the same as well..

Great. Thanks for color. That’s really helpful. Shifting to kind of more of macro a question in terms of the activity with unsubsidized developments, I think, there was a recent announcement that developers are proceeding with a 300 megawatt unsubsidized wind project in Spain.

This appears to the first or one of the first on the scale to be to kind of move forward. Although, there is a doubt that after this has been awarded that might be carried out. It’s only highlights the direction where the industry is going and we’re moving toward unsubsidized demand.

Can you -- I know you spoke to a little bit in your prepared remarks, but can you talk about how quickly you expect the industry to move to unsubsidized demand.

And I know we have and approximately you can talk to the activity here in the U.S., as well as globally?.

Yeah. Phil, I think, that we’re starting to see examples of that already. The Mexico tenders, the Turkey, [inaudible] tender of 1 gigawatt, the Spain example. And then in the -- and they are already kind of two years out or so as they think about bidding some of these tenders. In the U.S.

orders placed last year on the 80% of the PTC deal basically have through the end of 2021 to install those turbines, we mention the 10 gigawatt that was safe harbored and that not all of that 10 gigawatts may get built, but a very large percentage of it should and if you think about it we are kind of constrain between now and then in the U.S.

market, the forecast being 8 gigawatt to 10 gigawatt to 12 gigawatt or so roughly over the next few years. You can imagine a good chunk of that 10 gigawatt perhaps being installed in 2021.

Then the question is what happens on 60% orders this year and with utilities doing more of the work themselves, there’s probably some more efficient uses of the tax, the modernization of the tax equity and use of tax equity and modernization of the credit really that would allow 60% and perhaps even 40% to continue.

So that is still subsidized quote so to speak for a bit. But, yeah, the glide path is there and so the really good news I think we are starting to hear some of the industry leaders talk about pricing in the $0.02 to $0.0225 or $0.03 unsubsidized in the early 2020s or perhaps by mid-2020 of the 2020 timeframe. But that all -- we like that glide path.

It really hangs together as you think about it. Our work is not done to continue to drive down the cost of wind. You can imagine our customers and NTBR is still working to do so over that period of time.

So long answer there again but you could consider it certainly in the early to mid-2020s that most all the work being done is likely to be on an unsubsidized basis that way..

Great. Thanks, Steve. One more if I may, I would like to kind of put a final point on Steve’s question earlier about the transition -- potential transition cost in 2020. 2018 is an investing year, 2019 we should get more normalized startup in transition costs. Just to kind of again put on a final point on it.

Should 2020 look more like 2019 or what degree of risk is there that it could be an investing year in 2020 if product transitions are two years or do you really high degree of confidence that still look much more like 2019?.

Yeah. Phil, this is Bill. I will suggest it will probably look more like 2019 which would be more startups than transitions as we convert the balance of our prioritized pipeline. Some of that will be can -- will be closed in ‘19 obviously and then we’ll have those startups likely in ‘20.

So you’ll see a similar level of startup, but I think the transition as Steve mentioned in his response to Stephen’s earlier question, I think, we should see a much more modest level of transition then certainly in ‘18..

Great. Bill, Steve, thanks very much. I will pass it on..

Thanks, Phil..

Our next question is from Jeff Osborne Cowen and Company. Please go ahead..

Yeah. Good afternoon, guys. I might have missed this.

But Bill I was wondering did you disclose what the 606 impact specifically was for Q1 for revenue and EBITDA results?.

Yes. It’s a little -- it’s in the footnote to in the 10-Q, so you can get sense of it, but it’s a little hard to get the exact impact. There were impacts related to and obviously recognizing revenue on the working process.

There’s a true-up concept whereas if estimates changed for cost to complete or for total contract revenue that has an impact as well. But we didn’t actually call out what the different was..

Okay.

I guess, in particular looking at the EBITDA, was there any like one-time true-ups that inflated Q1 as it relates to looking at the Q1 as a percentage of the total EBITDA for the year?.

Yeah.

I think there was -- yeah there was actually a negative impact for a true-up as it relates to it, but net-net, it was a pickup because of the increase in the contract asset values and I will use that term because that’s where the ASC 606 called that they are basically for SL guys that’s the buildup of weep in the raw materials and so we are recognizing revenue on the build-up of it so it’s….

Okay. That’s fine..

Yeah..

I will go through the Q and revert back.

Just two other real quick ones, on the Vestas Izmir, is that, if I’m doing the math right, is that the old Camisetas option that was not exercised or is there an industry line that you added capacity to Izmir?.

No. We had -- the plant we built had capacity for Vestas for additional lines there and so they took that capacity or at least one of the slots of additional capacity, but it doesn’t impact the Gamesa plus one..

So, Gamesa -- the Gamesa site still empty at the moment..

That’s correct..

Got it. And then, I don’t know, if you can answer this or not, but you highlighted a couple items as it related to the gross margin cycle time and shared pain gain. I was just curious on the cycle time, I know China in the past have been added around the 24 hour cycle time.

Are any of the other facilities at that level? And then the follow-up question on the margin side, which was impressive is just the shared team gain just hypothetically if you had $100 of savings, are you passing on $100 of that to your customer to-date to help them lower globalized cost of energy or keeping any portion of that, is there any way to kind of aggregate what that that savings is or gain that you’re capturing.

Is it part of your cycle time improvement, reduction in building materials?.

Yeah. On the first one cycle time, we are at 24 in all locations not for all blades all the time. Obviously for some of the blades were in transition on our startup, it cycle time starts higher, but for virtually all of the blade models where we are in serial production where at or near 24 hours and in some cases lower than that.

As it relates to the shared pain gain, as we have talked about in the past, generally at the 70/30 split with our customers, in some cases it’s 50/50. So if it’s $100, they would get $70, we would get $30. We don’t quantify specifically what the total shared pain gain is on an aggregate basis or customer that we disclose. But we do have the option….

Yeah..

We do have the option if we choose to share more than we are contractually obligated to and we have talked about….

Yeah.

And that’s a -- that was it sort of the theme at the Analyst Day on the negative side, so I was just trying to get a sense of, is that better or worse than you are anticipating sharing more as it relates to your commentary in November?.

Yeah. Just to clarify the commentary in November. I think the commentary was we could choose to do so, we could choose to do more than we are contractually obligated, so I just want to make sure that’s clear, we didn’t say we would do all of it, but we could choose to.

But I think as we work through some of the challenges with our customers, as we are looking at transitioning some of the blades, we may choose to and in some cases when we transition to a blade, we may not keep 100% of the gain we had on the prior blade, right.

So if we shared at 70/30 and our margin went up on that blade, when we go through a transition and we re-price the new blade, we may give back some of that gain margin, if you will from before initially and then we’ll get it back as we improve from a productivity standpoint.

So I will say there is puts and takes, so it’s not just in all cases we are giving up that we would give up more than we have to, so there’s puts and takes and that’s why we said we don’t anticipate an issue with our margin and the margin that we’ve guided to, as a result of balancing the puts and takes as it relates to that..

Yeah. Appreciate all the details. That’s very helpful. Thank you..

Thanks Jeff..

The next question is from Pavel Molchanov from Raymond James. Please go ahead..

Thanks for taking the question guys.

Can you give an update on the bus body fab in Newton Iowa kind of what’s the startup timetable and when you’re expecting to reach steady-state operations there after startup?.

Yeah. Pavel, it’s a -- as we disclosed, I think, in the fourth quarter, as well as in the Q, we plan to start up in second quarter. So we are pretty much in the second quarter, so we are on track with that start up.

So we will be producing buses out of Iowa by the end of the second quarter and expect to be at a full production rate probably by the end of the third or early fourth quarter there..

Okay. And when I look at your non-wind revenue in Q1, I think, it was just under $20 million, if we just annualizing that, we would get a high end of your $75 million to $80 million target for the year and that’s without the Newton fab.

So did that imply that you’re going to be shifting some sales that you’re currently fulfilling elsewhere into the Newton fab, because other idea is until you get above $80?.

Yeah. That number included. What was -- what’s happening in Iowa. So it didn’t exclude that. So that’s in the non-blade -- it’s in the non-blade number..

Okay.

So -- but you got to $20 million without any sales from that a new fab, correct?.

Yeah. We have tooling in there and we also have service revenue in there as well..

Yeah. Pavel, remember there’s wind-related tooling in that number also, so that’s not just a transportation number..

And we are producing buses in Rhode Island as well..

That’s right..

Got it. Okay. Clear enough. Thank you..

Yeah..

You bet..

Our next question is from Eric Stine from Craig-Hallum. Please go ahead..

Hi, Steve. Hi, Bill. It’s Alex Fuhrman for Eric. Thanks for taking the question..

Hey.

How’s going?.

Not to bad. Thank you. First, on the transition and startups, obviously, since it is key for the 2019 ramp. Can you just provide an update on how things are progressing with those? Have you seen any unplanned issues or delays or anything outside of the ordinary or is just kind a status quo.

You did mention more blades in production at quarter end to kind of facilitate some of those I think right?.

Yeah. There are number of startup and transition programs all going on and they are several better that ahead and from time to time we may have one or two that are little bit behind.

But we are not going to be reporting out on detail of every line around the world of transition or startup, but suffice to say, we have confirmed our guidance and are generally on track..

Okay. Sounds good. And then second on just high level on the overall lines. Looking at what you have in-house today and with the transitions and startups going as planned.

I mean, it seems like most of your 2018 targets are in hand today, maybe you just need a few more lines to close, is that right or is there anything that we are missing?.

Yeah. I think that’s right on the first and then on the line, so we closed five lines on a nominal of 12, the range was 10 to 14, so we are tracking pretty well against the range of 10 to 14, but we have some more work to do there between now and the end of the year..

Right. Okay. And then last question maybe just on repowering seeing much more that in the market, seems like a real nice opportunity for you guys.

I mean is there a way to quantify what percentage of the business that might be today and how you think it can become going forward?.

The repowering percentage of the total market or the ability for that to add to the market of new machines it’s starting to grow, but it’s still not a very large percentage in total of the new installs on an annual basis. It’s getting upper amount of press in the U.S. because of the PTC benefit that some of the repowering projects could take.

So that is going on in the U.S. market on that basis. But the bigger macro over time would be can we -- will the industry increase the overall market on an annual basis based on starting to replace old machines that might have been in the ground for 20 years or so.

That’s starting to contribute but it’s not a major number and for us we are largely building new blades, state-of-the-art machines, new blades.

So unless that repowering project is taking out the old machine entirely and putting in a brand-new machine that’s we may not be participating in the business and if it’s that way then it looks like just new orders to us for the most part, a little tougher to call that out exactly..

Yeah..

The good news is, it’s starting to contribute to the overall demand. But truthfully not a huge percentage yet..

Right. Okay. Thanks for taking the questions and congrats on the quarter..

Thank you..

Our next question is from Joseph Osha from JMP Securities. Please go ahead..

Hi, there..

Hey, Joe..

Hi. Back to Pavel’s question, I’m looking at the Q here and as you point out only about like $4 million of that the $20 million in non-void sales were actually transportation and the implication is that that’s going to grow.

But in your guidance, you say that the number that you refer to is all non-void billings, which I would assume includes the molding and equipment sales and what not, so it kind of gets me back to the question Pavel asked, I would think if the transportation business is going ramp that $75 million to $80 million still looks low, can you help me understand that?.

Our guidance is $75 million to $80 million Joe and that’s where we are at right now. So I mean that includes our transportation, it includes tooling and it includes some other small service, some other small transportation work that we do as well..

All right. Cool.

And then the, I think, this is just a timing question if you go back and look at what you guys said in Q1 you were expecting six lines to be in startup and seven in transition and things came out a little different where you had 10 in startup and 4 in transition, is that just timing or is there something else going on there we should know about..

It’s just timing. I think when we talked about it originally some of these can move a week or two week which could flap the quarter, so again….

Yeah..

… I was just trying to give you more of a general idea of the cadence of what is specific necessarily, because it does move a little bit, so it’s just timing..

And one other….

But….

And one other very quick one there, you’ve given us Q1 ‘17 now for comp ASC 606, may I have missed it, did Q2, 3 and 4 ever show up or those going to roll out as you report ‘18 and put the Qs out?.

Yeah. As the Q is come out we will show you restated not only for that quarter but for the year to-date..

Okay. Thank you very much..

Yeah. You bet. Thanks, Joe..

Thanks, Joe..

Thank you. This concludes the question-and-answer session. I would like to turn the floor back over to management for any closing comments..

Yeah. Thanks again everyone for your interest in TPIC and we look forward to continuing to update you on our progress. Thank you..

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..